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Arbitration awards in Turkey

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The award

RequirementsWhat legal requirements are there for recognition of an award? Must reasons be given for the award? Does the award need to be reviewed by any other body?

While domestic awards issued in Turkey can be set aside, a review of the request will be carried out on the file unless the court decides otherwise. The court may refuse to suspend the award’s execution unless the applicant deposits a security. Each party may appeal against the arbitral award through annulment proceedings, although an appeal will not suspend the award’s execution.

While the rules established by the New York Convention are the principal authority for enforcing foreign arbitral awards in Turkey, they do not apply to domestic arbitral awards or those related to non-commercial matters. In cases where a party is not a signatory to the New York Convention or is not a party to any of the international treaties, bilateral or multilateral, ratified by Turkey, the International Private Procedure Law governs the recognition and enforcement of arbitral awards and provides a mechanism parallel to that established by the convention.

In order for a foreign arbitration award to be executed in Turkey, a competent Turkish court must render an enforcement decision. Courts may do this without reviewing the award’s merits, should the foreign judgment meet the following criteria:

There must be a valid arbitration agreement or arbitration clause.

The judgment must comply with Turkish public order and morality rules.

The subject matter of the foreign judgment must not fall under the exclusive jurisdiction of Turkish courts (eg, disputes arising from immovable assets or concerning public order).

The right of defence must be conferred to the parties and they must have been duly served or made fully aware of the proceedings throughout the whole process. In line with the principle of public order, due process must have been observed.

The party against whom the award is invoked must have been made fully aware that arbitrator(s) were being appointed and granted the right to defence.

The appointment of arbitrator(s) or the procedure that the arbitrator(s) apply must comply with the parties’ agreement or in the absence of such an agreement, with the law of country where the award was rendered.

The award must deal with matters within the scope of the parties’ agreement.

The judgment must be final and binding with no recourse to appeal or similar review under the laws of the respective country.

Like domestic arbitral awards, arbitral awards subject to the International Arbitration Law are also subject to setting-aside and appeal proceedings.

Timeframe for deliveryAre there any time limits on delivery of the award?

Both the Civil Procedural Code and the International Arbitration Law establish that unless otherwise agreed between the parties, the arbitrators shall render the award on the merits within one year from the date on which the sole arbitrator was appointed; or in cases where an arbitral tribunal is constituted, from the date on which the minutes of the first meeting of the arbitral tribunal were issued. The term of the arbitral proceedings may be extended by the parties’ mutual agreement or, if they fail to agree, by a competent court of first instance on the application of either party. If the court does not grant an extension, the arbitral proceedings will be terminated upon the expiration of the statutory arbitration term. The decision of the first-instance court is final and binding.

RemediesDoes the law impose limits on the available remedies? Are some remedies not enforceable by the court?

An arbitral tribunal that is strictly bound by the parties’ request will not grant remedies or relief with respect to matters that are not within the scope of the arbitration agreement and the parties’ request. In addition, since punitive damages are not recognised under Turkish law, any arbitral award that includes these would be contrary to Turkish public order and would thus be set aside.

What interim measures are available? Will local courts issue interim measures pending constitution of the tribunal?

At the request of one of the parties, the arbitral tribunal may issue a preliminary injunction or attachment during the arbitral proceedings and demand appropriate guarantees or security from the requesting party. The International Arbitration Law limits the tribunal’s authority when it comes to ordering a preliminary injunction or attachment by prohibiting it from issuing preliminary injunctions or attachments that are solely enforceable by governmental authorities. For example, real property owned by the respondent may not be seized based on a preliminary attachment ordered by an arbitral tribunal because the seizure of real property requires the involvement of execution officers.

The arbitral tribunal is prohibited from issuing preliminary injunctions or attachments which are binding on third parties because it may not participate in the arbitral proceedings and thus could not properly object to the decision rendered by the arbitral tribunal.

Either party may request the court to impose a preliminary injunction or provisional attachment during the arbitral proceedings in cases where the arbitrator or arbitral tribunal is unable to act effectively and in a timely manner. If such conditions do not exist, an application to the court during the ongoing arbitration proceedings would be made only upon the approval of the sole arbitrator or arbitral tribunal or in the presence of a written agreement between the parties.

It is also possible for either party to request that the court impose a preliminary injunction or provisional attachment prior to the arbitral proceedings. If a party has obtained a preliminary injunction or attachment from a domestic court with respect to a matter that is subject to an arbitration agreement prior to arbitral proceedings, it must initiate arbitral proceedings within 30 days of obtaining or the preliminary injunction or attachment will automatically become null and void.

The preliminary injunction or attachment decision may be amended or revoked by the arbitrator or arbitral tribunal.

If one of the parties refuses to comply with a preliminary injunction or attachment rendered by the arbitral tribunal, the other party may request the assistance of the competent court, which may enforce the arbitral tribunal’s decision by issuing a preliminary injunction or attachment. If necessary, the competent court may authorise another court to issue the injunction or attachment, when justified by geographical reasons.

InterestCan interest be awarded?

There is no provision in the International Arbitration Law that precludes the arbitral tribunal from awarding interest. The arbitral tribunal may determine what interest should apply and whether a party is liable to pay interest under the applicable law.

At what rate?

The rate of interest applicable to the dispute will differ depending on the applicable law. Under Turkish law, the default interest rate is 9%, the default interest rate which applies to late payments in product service supply is 11.50% (unless otherwise is agreed by the parties) as of January 1 2016, and the advance interest rate is 10.50%.

FinalityIs the award final and binding?

The award should be final and binding in order to be recognised and enforced under Turkish law.

What if there are any mistakes?

Within 30 days under the International Arbitration Law (two weeks under the Civil Procedural Code) of the service of the award, either party may request that the arbitral tribunal correct it if there were errors made in the calculation or there are any other clerical, typographical or other errors of a similar nature. The arbitral tribunal may make such corrections on its own volition within 30 days (two weeks under the Civil Procedure Code) of the award date. Either party may request that the arbitral tribunal gives an interpretation of the award, either in whole or in part. After consulting the other party, if the arbitral tribunal considers the request to be justified, the correction shall be made or the award shall be interpreted within 30 days of receipt of such request by the arbitral tribunal (one month under the Civil Procedure Code).

Can the parties exclude by agreement any right of appeal or other recourse that the law of your jurisdiction may provide?

Pursuant to the International Arbitration Law, the parties may partially or fully waive their right to file an action to set aside the award. However, parties based abroad may only fully waive their right to file a setting aside action by an express declaration in writing or as provided by the arbitration agreement.

AppealWhat is the procedure for challenging awards?

Under the International Arbitration Law, an action for setting aside the award should be filed before the competent first-instance court within 30 days from delivery of the award or – as the case may be – within 30 days of the correction, interpretation or complementary award. This period is one month under the Civil Procedural Code for domestic arbitrations. The court will give priority to this action and conclude it promptly.

On what grounds can parties appeal an award?

The parties are entitled to appeal a decision to set aside an award in line with the provisions of the Civil Procedural Code, on the legal grounds limited to those that apply to setting aside an award.

An arbitral award may be set aside by the court if:

a party to the arbitration agreement lacks the necessary competence;

the arbitration agreement is invalid under the applicable law or the applicable law has not been agreed by the parties, under Turkish law;

the arbitrator or arbitral tribunal was not appointed in accordance with the procedure agreed between the parties or in accordance with the International Arbitration Law (or Civil Procedural Code in case of domestic arbitration);

the award was not rendered within the agreed or statutory term for arbitration;

the arbitrator or arbitral tribunal did not have jurisdiction to hear the dispute;

it deals with a dispute that is not contemplated by or does not fall within the terms of the submission to arbitration, contains decisions on matters beyond the scope of the submission to arbitration, or the arbitrator or the arbitral tribunal has exceeded its competence;

the arbitral proceedings were not carried out in accordance with the procedures agreed between the parties or, failing such agreement, in accordance with the procedures of the International Arbitration Law (or Civil Procedural Code in case of domestic arbitration) and this failure had an impact on the merits of the award;

the principle of equality for the parties was not respected;

the subject matter of the dispute is not capable of being settled by arbitration under Turkish law; or

it conflicts with Turkish public policy.

EnforcementWhat steps can be taken to enforce the award if there is a failure to comply?

For the enforcement of final awards by parties, an action must be brought to the court of first instance. If the territorial jurisdiction of the competent court has not been determined by the parties under the contract, the defendant’s habitual residence or place of defendant’s assets may constitute the territorial jurisdiction of court.

Under Article 4 of the New York Convention and Article 61 of the International Private Procedure Law, at the time of the application for recognition and enforcement decision, the applicant shall provide the following to the Turkish court:

the original or a duly certified copy of the arbitration agreement or the arbitration clause;

the original or a duly authenticated copy of the enforceable final arbitral having binding effect on the parties; and

authenticated copies of the translations of the above-mentioned documents.

Can awards be enforced in local courts?

In order for a foreign arbitration award to be executed in Turkey, a competent Turkish court must render an enforcement decision. Turkish courts do this without reviewing the award on its merits, should the foreign judgment meets certain criteria for enforcement.

How enforceable is the award internationally?

Arbitral awards issued in Turkey are generally enforceable internationally. As Turkey is a party to the New York Convention, an arbitral award rendered under this would be an arbitral award within the scope of the convention for the purposes of recognition and enforcement.

To what extent might a state or state entity successfully raise a defence of state or sovereign immunity at the enforcement stage?

While states or state entities may enjoy immunity in relation to their sovereign powers, they do not enjoy immunity with respect to private law disputes. States may also enter into arbitration agreements with respect to arbitrable matters.

Are there any other bases on which an award may be challenged, and if so, by what?

The parties may request the annulment of arbitral awards; the International Arbitration Law and the Civil Procedural Code provide an exclusive list of limited grounds on which an award may be set aside.

How enforceable are foreign arbitral awards in your jurisdiction?

Until recently, courts had a tendency to avoid recognising and enforcing foreign arbitral awards, particularly based on public policy concerns. ‘Public policy’ is often regarded as a vague concept and is interpreted by the Turkish courts on a case-by-case basis. Turkish courts face a dilemma between protecting the state’s authority to refuse to enforce awards which contravene domestic values in terms of public policy and, on the other hand, trying to respect the finality of foreign awards. However, courts rarely reject requests for recognition and enforcement of arbitral awards and more narrowly apply public order criterion.

Will an award that has been set aside by the courts in the seat of arbitration be enforced in your jurisdiction?

Turkey is a party to the New York Convention and under Article (V)(1)(e) of the convention, if the award has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made, recognition and enforcement of the award may be refused. Therefore, in line with this provision, Turkish courts may also reject the enforcement of such decisions. Also, if the setting-aside procedures have been initiated before the courts in the seat of arbitration, Turkish courts may suspend the enforcement proceedings and await the finalisation of the decision on setting aside as a preliminary question.

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